© Andrew Schwarz, 2002Slide 1 Lecture 2/Session 2 Key Information Technology Systems in Organizations

© Andrew Schwarz, 2002Slide 2 Introduction  While we have talked about technology and systems in a broad context, we have yet to understand the different type of information systems that rely upon information technology  This lecture will discuss the key information systems in organizations

© Andrew Schwarz, 2002Slide 3 Unanswered Questions 1. What are the different types of systems by organizational level? 2. What are the different types of systems by functional area? 3. How do organizations integrate all of the systems? 4. What is the application of this lecture for you, as a manager, in the digital age?

© Andrew Schwarz, 2002Slide 4 Question #1: What are the different types of systems by organizational level?

Organization Levels Organizational LevelTypes of Managers STRATEGIC LEVEL SENIOR MANAGERS STRATEGIC LEVEL SENIOR MANAGERS MANAGEMENT LEVEL MIDDLE MANAGERS OPERATIONAL OPERATIONAL LEVEL MANAGERS OPERATIONAL OPERATIONAL LEVEL MANAGERS KNOWLEDGE LEVEL KNOWLEDGE WORKERS SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN MARKETING RESOURCES

© Andrew Schwarz, 2002Slide 6 Systems by Org Level  Operational level: systems monitor the elementary activities and transactions of the firm –Transaction Processing Systems  Knowledge level: systems support knowledge and data workers –Knowledge work systems/Office Systems  Management level: systems support monitoring, controlling, decision-making, and administrative activities –Management Information Systems/Decision Support Systems  Strategic level: systems that support long-range planning activities –Executive support systems

© Andrew Schwarz, 2002Slide 7 Transaction Processing Systems  Computerized systems that perform and record the daily routine transactions necessary to conduct the business  Users: operations personnel; supervisors  Examples: accounts payable, accounts receivable, payroll, order tracking, order processing

© Andrew Schwarz, 2002Slide 8 Knowledge Work Systems  Systems that aid knowledge workers in the creation and integration of new knowledge in the organization  Users: professionals, technical staff  Examples: engineering systems, graphics systems, 3-D systems

© Andrew Schwarz, 2002Slide 9 How do Firms Capture Knowledge?  Knowledge management: the set of processes developed in an organization to create, gather, store, maintain, and disseminate the firm’s knowledge –Senior executive in charge of KM: CKO  Types of knowledge: –Structured knowledge, such as product manuals –External knowledge of competitors, products, and markets (competitive intelligence) –Tacit knowledge—knowledge in the minds of the employees

© Andrew Schwarz, 2002Slide 10 Importance of Knowledge  As stated in Lecture 1, the dominant workers are knowledge workers  So, if all companies were given the same amount of resources, raw materials, locations, etc., what would be the source of competitive advantage for that firm? –The knowledge within the employees!  Thus, firms are seeking to capture and retain that knowledge so that they can have a sustainable competitive advantage

© Andrew Schwarz, 2002Slide 11 Systems Used to Capture Knowledge  Expert system: captures the expertise of a human in limited domains of knowledge –Rules-based capture—if this happens, then I would make this decision –Similar to a DSS, but is built upon human knowledge  Some companies attempt to use artificial intelligence (AI) and neural networks so that the systems learn from their history –Problems with AI!

© Andrew Schwarz, 2002Slide 12 Intelligence  Above knowledge is intelligence, or carrying out the knowledge through implementation  Companies are ultimately attempting to create intelligent agents –Software programs that use a knowledge bask that carry out tasks for users or complete business tasks

© Andrew Schwarz, 2002Slide 13 Office Systems  Computer systems that are designed to increase the productivity of data workers in the office  Users: Clerical workers  Examples: –Word processing: facilitate the creation of documents (e.g. Microsoft Word) –Desktop publishing: produces documents combining output from various sources (e.g. Microsoft Publisher) –Document imaging systems: convert documents and images into digital form so they can be stored on the computer

© Andrew Schwarz, 2002Slide 14 Decision Support Systems  Systems that combine data and analytic models or data analysis tools to support nonroutine decision making for individuals –Use input from TPS data plus external sources  Users: Professionals; staff managers  Examples: sales region analysis, cost analysis, pricing analysis

© Andrew Schwarz, 2002Slide 15 Types of DSS  Model driven: stand-alone system that uses models to perform “what-if” and other kinds of analyses  Data-driven: system that relies upon information within databases to make decisions, but is not configured with a model in mind

© Andrew Schwarz, 2002Slide 16 Components of a DSS TPS External Data DSS Database DSS Software System Models OLAP Tools Datamining Tools User Interface User

© Andrew Schwarz, 2002Slide 17 Group Decision Support System (GDSS)  An interactive computer-based system to facilitate the solution to unstructured problems by a set of decision-makers working together as a group  The group uses software tools to help it arrive at a decision –Questionnaire/voting software –Electronic brainstorming tools –Idea organizer –Electronic meeting system

© Andrew Schwarz, 2002Slide 18 Differences between DSS/GDSS  Users –DSS: individuals; GDSS: groups  Objective of use –DSS: build models using data; GDSS: facilitate interaction between individuals  Effectiveness –DSS: depends on how well the tool is built by designers; GDSS: depends on facilitators, tools selected, and participants

© Andrew Schwarz, 2002Slide 19 Management Information Systems  Systems that support managers as they plan, control, and make decisions –Summarize and report on a company’s basic operations—not day-to-day, but trends  Users: middle managers  Examples: annual budgets, capital investment analysis, analysis of sales data (aggregated from TPS)

MIS MIS FILES SALES DATA UNIT PRODUCT COST PRODUCT CHANGE DATA EXPENSE DATA MIS REPORTS MANAGERS TPS Order Processing System Materials Resource Planning System General Ledger System ORDER FILE PRODUCTION MASTER FILE ACCOUNTING FILES Example of Relationship Between TPS and MIS

© Andrew Schwarz, 2002Slide 21 Executive Support Systems  Systems designed to address nonroutine decision making –Incorporate data from TPS, MIS, DSS, and other external sources  Users: senior managers  Examples: trends in the marketplace, forecasting, personnel planning

Systems by Level and Decision Type TPS OAS MIS KWS DSS ESS ORGANIZATIONAL LEVEL TYPE OF DECISIONOPERATIONALKNOWLEDGEMANAGEMENTSTRATEGIC STRUCTURED ACCOUNTS RECEIVABLE ELECTRONIC PRODUCTION SCHEDULING COST OVERRUNS SEMI-BUDGET STRUCTUREDPREPARATION PROJECT SCHEDULING FACILITY LOCATION UNSTRUCTUREDPRODUCT DESIGN NEW PRODUCTS NEW MARKETS

© Andrew Schwarz, 2002Slide 23 Relationship Between Systems ESS TPS KWS OAS DSSMIS

© Andrew Schwarz, 2002Slide 24 Question #2: What are the different types of systems by functional area?

© Andrew Schwarz, 2002Slide 25 Systems by Functional Unit  Sales/Marketing: Systems that help the company identify customers; develop, promote, and sell products/services; and provide customer support  Manufacturing/Production: Systems that deal with the planning, development, and production of products/services and with controlling the flow of production  Finance/Accounting: Systems that keep track of the firm’s financial assets/fund flow  Human Resources: Systems that maintain employee records; track employee skills; job performance and training; and support planning for employee compensation and career development

Examples of Systems by Functional Areas SystemDescriptionOrganizational Level Machine Control Control Actions Of Equipment Operational Computer-aided-design Design New Products Knowledge Production Planning Decide Number, Schedule Products Management Facilities Location Decide Where To Locate Facilities Strategic Sales/Marketing Manufacturing SystemDescriptionOrganizational Level Order Processing Enter, Process, Track Orders Operational Market Analysis Identify Customers & Markets Knowledge Pricing Analysis Determine PricesManagement Sales Trends Prepare 5-year Forecasts Strategic

Examples of Systems by Functional Areas SystemDescriptionOrganizational Level Training/Development Track Training, Skills, Appraisals Operational Career Pathing Design Employee Career Paths Knowledge Compensation Analysis Monitor Wages, Salaries, Benefits Management HR Planning Plan Long-term Labor Force Needs Strategic Finance/Accounting Human Resources SystemDescriptionOrganizational Level Accounts Receivable Track Money Owed To Firm Operational Portfolio Analysis Design Firm's Investments Knowledge Budgeting Prepare Short Term Budgets Management Profit Planning Plan Long-term Profits Strategic

© Andrew Schwarz, 2002Slide 28 An Emerging Sales/Marketing System  Given the proliferation of companies (from our discussion in Session 1), keeping and retaining customers is becoming more crucial  To help keep track of customers, companies are turning to customer relationship management (CRM) software –Coordinates all of the business processes for dealing with customers

© Andrew Schwarz, 2002Slide 29 Question #3: How do organizations integrate all of the systems?

Are These Systems Separate? In the discussion thus far, we have treated the systems as being separate from one another ManufacturingAccountingFinanceMarketing/SalesHRManufacturing Systems Accounting Systems Finance Systems Marketing/Sales Systems HR Systems Business processes Business processes Business processes Business processes Business processes

© Andrew Schwarz, 2002Slide 31 Traditional Views of Systems  Reality check: systems are (and need to be!) integrated  So how do companies integrate systems? –Build their own patches –Use enterprise systems, or firm-wide information systems that integrate key business processes so that information can flow freely between parts of the firm [also known as ERP, or Enterprise Resource Planning systems]

Enterprise View of Systems Sales & Marketing Accounting Finance Manufacturing Human Resources Business Processes Enterprise-wide Business Processes VendorsCustomers

© Andrew Schwarz, 2002Slide 33 Why would Firms use an ERP? 1. Creation of one unified organization—no more stovepipes 2. Automation of manually-intensive processes 3. Better reporting and decision making— knowledge is in the hands of the knowledge workers 4. Unified technology platform 5. More efficient company and customer driven business

© Andrew Schwarz, 2002Slide 34 Why do Firms Not Use an ERP? 1. High up-front cost 2. Challenge of implementation 1.Only 10-15% of implementations are smooth 3. Systems are inflexible—they define the processes and your organization must change how you do work 4. Tough to find the strategic value

© Andrew Schwarz, 2002Slide 35 Question #4: What is the application of this lecture for you, as a manager, in the digital age?

© Andrew Schwarz, 2002Slide 36 Top 3 Applications From This Lecture 1. Are there processes in your organization that need to be automated? 2. Are you thinking at the strategy level for technology—do you see areas where technology could help your firm grow? 3. How integrated are your systems? Are your tasks repetitious (do you have to re- enter data already in another system?)?